annual review indst 2024 public - Flipbook - Side 33
Annual Review 2024
80 years or more, with no review or consideration of auditor
rotation. In 2024 we recommended opposing the auditor
and audit committee chairs for 258 companies, including
Target, Dow, Goodyear, Sherwin-Williams, Archer
DanielsMidland, Deere & Co, Kimberly-Clark, Coca-Cola
and Johnson & Johnson.
Board independence
We continued to look for higher levels of independence to
achieve more effective boards at companies in Asia and
emerging markets. At Mexico’s Cemex, we recommended
a vote against the re-election of three directors with long
tenures, two of whom had served on the board for over
25 years. We question the independence of long-serving
directors as their tenures could indicate over-familiarity and
insufficient challenge to management and other board
members. In previous engagements and at AGMs, we had
asked for a gradual refresh of the board to bring in new
independent directors with skills aligned with the company’s
strategy, but Cemex did not take appropriate action.
In India, we observed increasing levels of board
independence, but our concerns about the quality of
independent directors remained. For example, we
recommended voting against two directors at Reliance
Industries, who were classified as independent by the
company. They had indirect connections that raised concerns
about their genuine independence, such as one director’s firm
providing legal services to Reliance Industries.
VOTING CASE STUDY
ExxonMobil
appropriate for the company to assume the role of fixing
the SEC shareholder proposal submission process via
a Texas court on behalf of a system where other voices
deserve to be heard.
Shareholder rights were under the spotlight in the
run up to US oil and gas major ExxonMobil’s annual
shareholder meeting. Exxon’s decision to proceed
with a lawsuit against shareholders Follow This and
Arjuna Capital over a climate-related shareholder
proposal that they had withdrawn, was criticised
by major institutional investors. A judge subsequently
ruled that the case against Netherlands-based Follow
This could not proceed for jurisdictional reasons,
while the case against Arjuna Capital was dismissed.
The withdrawn shareholder proposal was related to
Scope 3 emissions, and the co-filers committed not to refile
it. However, Exxon decided to continue the suit, stating that it
wanted to gain clarity on the SEC shareholder filing process.
In the run up to the shareholder meeting, several large
institutional investors went public with their unease, which
some perceived as an attack on shareholder democracy.
We took the view that while Exxon had a legal right to
bypass the SEC, it could first have waited for the SEC to
opine, and that its use of litigation at that time was not
appropriate. We believe the company’s action has had a
dampening effect on the exercising of shareholder rights,
whether intended or not. We also believe it is not
For these reasons, we recommended a vote against
the lead independent director to hold him accountable
for these actions, as well as the company’s insufficient
management of climate-related risks. This is because
of medium-term targets that do not include non-operated
assets and the lack of evidence that the company
is engaging domestically and internationally to support
the climate transition.
However, the company has shown some progress on
its climate strategy through its membership of the Oil
and Gas Methane Partnership 2.0, updated disclosures,
including a Scope 3 emissions disclosure, and the
announcement of the company’s withdrawal from the
Independent Petroleum Association of America. This was
due to the organisation’s lack of alignment with the
company’s climate strategy, including on methane.
As a result, we recommended a vote in favour of the
members of the Environmental, Safety, and Public Policy
Committee, by exception to our policy. At the AGM,
the re-election of the lead independent director was
approved, but he received approximately 12% of votes
against, the highest level of dissent against his re-election
for several years.
Diana Glassman
Themes: Climate Change,
Board Effectiveness
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